The first example that comes to mind when you think of a big tech company is “Amazon”. Meanwhile, Amazon wasn’t a big name a few years ago.
Amazon started as a small online bookstore, but has exerted huge dominance in the tech space.
Amazon’s dominance has reshaped the global economy, forcing small retailers to shut down while controlling an overwhelming share of online sales. Amazon’s monopoly has also influenced labor markets, with its warehouse operations setting new, often criticized, standards for wages and working conditions. The ripple effect of such monopolization extends beyond the U.S.; it’s a global effect that affects global market prices and supply chains.
Do you want to know more about Big Tech Monopolies? Read here.
How Monopolies Start in Tech
Monopolies in the tech industry don’t happen overnight. They often start with a company introducing a unique product or service that disrupts an industry. Once the company gains a stronghold, it expands aggressively, through massive scaling. This aggressive expansion often involves acquiring competitors and controlling supply chains. In the end, the company – monopolising, sets industry standards that favor only its business model.
For example, Google started as a search engine but acquired YouTube, Android, and Waze to dominate the search engine space. The idea is to keep their customers caught in a web of dependence such that breaking free becomes almost impossible.
Another way tech companies become monopolies is through network effects—the more people use a product, the more valuable it becomes. Remember the “web of dependence” in the prior paragraph? This explains it better.
This was the same principle Facebook used when it acquired Instagram. Now users are hesitant to switch to alternatives with smaller user bases.
How Big Tech Companies Monopolize the Market
There are four major strategies big techs apply to monopolise the market:
- Buying Out Competitors – Big tech firms often acquire emerging startups that could become threats. Facebook’s purchase of Instagram and WhatsApp prevented them from developing into serious competitors.
- Creating Closed Ecosystems – Apple, for instance, locks users into its ecosystem by tightly integrating hardware, software, and services, making it difficult for users to switch to competitors.
- Using Data as a Weapon – Companies like Google and Amazon leverage vast amounts of user data to refine their services, making it nearly impossible for new players without such data access to compete effectively.
- Controlling the Infrastructure – Amazon Web Services (AWS) powers a significant portion of the internet. Many startups rely on AWS for cloud services, giving Amazon immense control over emerging businesses.
How Monopolies Destroy Markets and Innovation
Monopolies don’t drive efficiency, neither do they drive technological progress; they do otherwise.
When a few companies dominate the industry, competition dwindles, and innovation stagnates.
Let’s start with how monopolies lower competition and its effect:
Monopolies stifle competition, and without competitive pressure, firms have little incentive to innovate, improve product quality, or offer fair pricing.
This was evident in the early 2000s when Microsoft faced antitrust scrutiny for bundling Internet Explorer with Windows. By doing that, Microsoft marginalised competitors and dominated Operating systems. The effect of this was a significant drop in customers’ access to alternative browsers.
Furthermore, let’s look at how monopolies pose a threat to data privacy:
Monopolies pose a significant threat to data privacy because they often operate with little competition, allowing them to collect and use vast amounts of user data without sufficient oversight.
Companies like Facebook and Google have been criticized and even sued multiple times for their data collection practices, yet their dominance in the market means they face minimal consequences. With limited alternatives available, users have little choice but to accept these companies’ terms, making it easier for them to exploit personal data without meaningful accountability.
To Wrap It Up
Perhaps, big companies advance technological progress but at the expense of competition and innovation. They also expand at the expense of limiting consumer choice and raising ethical concerns.
For aspiring entrepreneurs, challenging big tech’s monopoly starts with strategic thinking. You must have a solid strategy that helps you leverage decentralisation , prioritise trust and sell your product eventually.
UphivaBETAR
Joseph Busari
